Homeowners holding up despite economic headwinds, Lowe’s and Home Depot say

Both Home Depot and Lowe’s reported quarterly earnings this week, with results indicating that U.S. homeowners are remaining largely resilient despite high gas prices and falling consumer confidence.

What’s happening: Home Depot reported a roughly five percent year-over-year revenue increase during its fiscal first quarter, while Lowe’s sales rose by just over 10 percent. 

The big picture: “The homeowner in a relative sense is perhaps more protected financially than other customer cohorts, and so we continue to see engagement,” Home Depot CFO Richard McPhail told CNBC in an interview. 

• Yes, but: They “continue to tell us that they are going to defer their spend on larger projects,” he added. “That’s consistent with what they’ve told us the last few years.” 
• Meanwhile, Lowe’s CEO Marvin Ellison confirmed that the company is seeing a “K-shaped economy dynamic” play out, “where higher-income consumers are spending more and lower-income consumers are pulling back on their spending,” CNBC noted. 

Zoom out: On an earnings call Tuesday, Home Depot EVP of Merchandising Billy Bastek emphasized the company’s strategy of targeting contractors, saying that its subsidiary SRS Distribution’s recent acquisition of HVAC distributor Mingledorff’s “gives us an incredible opportunity to penetrate the national market for HVAC parts and supplies.”

• “HVAC distribution represents an addressable market of approximately $100 billion,” he noted. 

Yes, and: Bill Boltz, EVP of Merchandising at Lowe’s, which is also expanding its contractor-facing business, said on an earnings call Wednesday that the company saw “strength in HVAC and water heaters” during the quarter, supported by its Lowe’s Home Services offering, which connects customers with local contractors. 

• Of note: The company’s “small to medium-sized” contractor customer, he added, “remains busy with repair and maintenance projects.”

What we’re watching: The earnings come amid a sluggish housing market, which has dented home improvement demand over the past few years.  

• “I think the key lever that we need to see is just rates come down, both 30-year fixed and short-term rates,” Ellison said Wednesday. 
• “When we see that happen, and I think what we’re talking about is a sustained sub-6% [mortgage] rate environment, we think that will start to loosen up this segment,” he added.